FSTA Updates

[ORAC]

Link to the actual report, rather than the press: Delivering Multi-Role Tanker Aircraft Capability

Summary

In March 2008, the Ministry of Defence (the Department) signed a private finance initiative (PFI) contract with AirTanker Ltd, for the Future Strategic Tanker Aircraft (FSTA) to provide air-to-air refuelling and passenger transport services. FSTA is based around 14 modified Airbus A330s and will replace the 24 Tristars and VC10s that form the RAF's current fleet.

Under the contract, AirTanker owns the aircraft and will provide them to the Department when required. AirTanker will also provide the associated aircraft support, maintenance and infrastructure, making the scope of the deal broader than any other defence PFI contract to date. The value of the contract, worth £10.5 billion over 27 years, also makes it the largest signed.

PFI works best where activities and demand are predictable. This is clearly not the case for FSTA. For instance, it is simply astonishing that the Department did not decide until 2006 that FSTA should be able to fly into high threat environments such as Afghanistan. Yet the Department is inhibited from changing the specification because of the implications to the cost of the PFI. Just two years after the deal was signed, the forthcoming Strategic Defence and Security Review is likely to change the demand for the services AirTanker has been contracted to deliver. As the Committee's previous work shows, dealing with changes on PFI deals is expensive and the Review may question whether this PFI deal is sensible or affordable. The fact that no other country has chosen to procure air-to-air refuelling and passenger transport using PFI type arrangements is further indication that PFI is not a suitable procurement route for such important military capabilities.

There are significant shortcomings in the Department's procurement of FSTA and we do not believe the procurement was value for money. The shortcomings include:

• assuming that PFI would be the right solution from the outset without a sound evaluation of alternative options;
• running only a limited competition;
• never developing a realistic fallback if the PFI solution proved unworkable;
• failing to have a clear understanding of the full costs of running its current aircraft fleets and failing to secure visibility of sub-contractor cost data, meaning the Department was unable either to compare costs with the price being offered by AirTanker or determine whether the PFI option was good value for money;
• not fixing the requirements until late into the process so that the negotiations themselves took over nine years to complete, more than double the expected four years. This delay in turn led to a considerable cost increase against initial estimates.
• not having the right skills and experience in place and failing to provide firm leadership until the later stages of the procurement to effectively manage the procurement, and
• not making timely decisions on fitting the necessary protection equipment to enable the aircraft to fly into high threat environments like Afghanistan, a task that the Tristar may have to continue doing until 2016.

In order to obtain best value going forward, the Department must retain contract expertise and ensure that staff make decisions regarding FSTA in the full knowledge of the financial implications. Without this action, the risk is that extra demands will be placed on AirTanker which result in additional, and unnecessary, payments being made by the Department.

On the basis of a Report by the Comptroller and Auditor General,[1] we took evidence from witnesses from the Ministry of Defence on: why PFI was used to procure FSTA, shortcomings in the procurement process, availability of cost data, how the deal was managed and risks in the transition from the current fleets.

[Algy]

FSTA airborne

First FSTA is airborne on first flight from Getafe. Tim Butler captain.

[BEagle]

As the Committee's previous work shows, dealing with changes on PFI deals is expensive and the Review may question whether this PFI deal is sensible or affordable. The fact that no other country has chosen to procure air-to-air refuelling and passenger transport using PFI type arrangements is further indication that PFI is not a suitable procurement route for such important military capabilities.

Surely the same logic applies to MFTS? If not, why not??

Currently, FSTA is unable to fly into Afghanistan as it does not have the necessary protection equipment to fly into high threat environments. The United Kingdom started operations in Afghanistan in 2001, when the requirements for FSTA were still immature. However the Department did not recognise the need for such equipment until 2006 in their Concept of Use document for FSTA and took the decision not to include it in the contract negotiations to avoid further delays, given the advanced stage negotiations were already at. The Department's explanation for the delay in recognising such a need was the significant difference in operational conditions between 2001 and 2006, in particular the scale of the challenge in Afghanistan.

I find that quite surprising. When I provided input to the FSTA ISUN author many, many years ago (about 15 years ago, IIRC...), I certainly included a full DASS requirement which even included Towed Array Decoys to counter the monopulse radar threat.....

I guess the high-priced talent in the MoD-box decided otherwise...

It was also stated at an early FSTA stakeholder meeting that 'ACAS requires the best value-for-money AAR'.....

[PPRuNeUser0211]

Beags....

shhhh! Stop speaking sense! Bad Beagle!

[Squirrel 41]

BEagle

Yes, MFTS is likely to be expensive bolleaux. Now pls go and sit on the naughty step.


S41

[Xercules]

You have to be sure of what you mean by delay - MoD and AirTanker will be talking about entirely different things. When MoD started a programme called FSTA there will have been a timeline with a stated EIS date. From my memory the discussions and negotiations that then followed dragged on and on, with what from some perspective could be viewed as changing of the goal posts, if not almost the pitch. These then extended the time until a contract could be signed. In that contract AirTanker will have agreed a delivery schedule of the service (rather than of the aircraft although the 2 are linked). When AirTanker talks of being on schedule it is referring to this plan and not the original MoD Procurement Plan. Much as many of you would like to do so, you cannot blame AirTanker for the internal MoD/Treasury created delays before the Contract signature.

[BEagle]

Xercules, very true. AirTanker should take no blame for any part of this affair. Once they were finally allowed to get on with it, they did precisely what they say they have done as regards the various milestones.

Whereas the MoD...... Did they really think that PFI AAR would attract a company which didn't wish to make a profit?

[Jig Peter]

MoD & profit

I'm sure that most MoD people involved in the FSTA/AirTanker business realised the company chosen would wish to make a profit, but given the politicos' predilection for "off balance sheet" accounting (a dodge beloved of company accountants who want to keep apparent profits up and liabilities under the carpet), anybody who queried that approach would surely be marked down a "not a team player".
I'm thinking that PFI seemed such a "good" way to spend without appearing to do so that it became the polticos' preferred solution, never mind long-term problems which would in any case show up after the next election. And to "EL" with everyone else ...

[NURSE]

as usual govern department trying to be like industry without the necessary skills/buissness Acumen being back seat driven by politicians and the tresuary and the actual specification being watered down to the bare minimum. But someone from RAF must have signed it of if so what was their tanker/ transport experience?

[Milarity]

How much?

£10.5 billion for 27 years. Thats more than £1million per day!

Glad to hear Tim Butler is still flying. His presence on the flight deck should dispel any slurs on MAUW limitations.

[Saintsman]

First Flight

[Ian Corrigible]

FF in the same sense as Brenda's birthday being on June 12th...

I/C

[Algy]

...and has now landed...

...just to clarify.

Official statement from Airbus Military.

Airbus Military Tanker for RAF completes first flight
16th September 2010
The first A330 MRTT Future Strategic Tanker Aircraft (FSTA) for the UK Royal Air Force has successfully completed its maiden flight from the Airbus Military facility at Getafe, Madrid following its conversion.
The aircraft, converted from a basic A330-200 by Airbus Military, took off at 11.41 local time (09.41 UTC) and landed at 13.37 local time (11.37 UTC) after a flight lasting close to two hours (airborne).
Chief Pilot FSTA Tim Butler captained the flight supported by Chief Test Pilot Eduardo Cuadrado. The engineering team on board included: Test Flight Engineer Santiago Manso, and Flight Test Engineers Jorge Fuentes and Alfonso Sopeña.
The crew reported that the aircraft, its systems, and two Rolls-Royce Trent 700 engines performed entirely satisfactorily. As planned, no refuelling activity was undertaken during this flight.
Tim Butler said: “After this major conversion of the aircraft to a MRTT, it was very satisfying to find everything working so well. This first flight of a second version of the A330 MRTT confirms the handling qualities and maturity of the aircraft.”
The flight marks the beginning of a test campaign that will lead to first delivery to the RAF towards the end of 2011.

[Roland Pulfrew]

BEags

Whereas the MoD...... Did they really think that PFI AAR would attract a company which didn't wish to make a profit?

That's a bit harsh. Everyone knew that the chosen company would be making a profit. It was never about that; it was all about the bit that JP has succinctly stated in the post below yours.

Unfortunately, and despite the best efforts of several desk officers, no-one in the squirarchy were prepared to accept that PFI was a load of bolleauxs for a military capability. A view apparently now (finally) shared by the House of Commons Defence Committee

[Art Field]

Nurse. The recent experience level of the staff officers on the project when I was working for the subsequently failed team from TTSC was mainly TriStar. At that time the TriStar was not doing so much AAR as later. However it must be said that the companies replying to the contract offer were pretty positive as to how they would configure the aircraft to meet the speck and no more. You only get what you ask for and what was asked for in the initial invitation to offer [which could have been updated] was rather vague and broad brush.

[NURSE]

Art thats the point i was trying to make. If its not in the spec its not in the contract. My partner is a registered procurement officer in local govt and has worked in industry as well. Her professional journal is full of stories of procurement gone wrong (mainly by Govt departments) MoD features occasionally. And usually it boils down to who ever drew up the spec left important pieces of information. But that spec is still being signed of by service officers who should be able to pick up on the fact that important items are missing from the spec.

[Squirrel 41]

Let's face it - the scale of the penalty clauses if they didn't hit their milestones will ensure that they do. I heard from someone who should've known that if they started missing their milestones, they'd breach their contract (and arguably more important) their banking covenants - at which point the banks could in theory pull the finance.

In other words, there is ever reason to expect AirTanker to meet the letter of the contract in order to pocket the cash - and I think that they will. In their position, I'd do the same thing. But for the sake of the RAF's operational flexibility and of the Poor Bl**dy Taxpayers (PBT), we need to scrap the PFI deal immediately, if not sooner.

S41

[cokecan]

anyone know if there is a get out clause at this stage - and how much it might be?

i'm assuming (yes, i know...) that if HMG could get out of the PFI, there'd be a number of A330 Tankers for sale for crab to coveniently buy...

[Saintsman]

there'd be a number of A330 Tankers for sale for crab to coveniently buy...

There would be two actually, one of which is still under conversion. If they then had to go through the procurement loop to buy and convert the remainder, the Tristars and 10s could find themselves lasting even longer....

But even if we went down that route, the MOD doesn't have the money to buy them up front.

Anyway, agreed that it is costly but people forget that it's not just about buying the aircraft. It's a complete package, and includes all the infrastructure and associated costs, even down to the cost of providing toilet rolls for 27 years. There are lots of hidden costs that people don't appreciate. Foe example, the aircraft may be deployed away from base so the crew have to be accommodated etc. AirTanker personnel would probably expect Ts & Cs that include a pension. Someone has to pay for all these things. Its all factored into the price. The real world is expensive.

Whether AirTanker will make excessive profits is another matter and there should have been levels agreed within the contract. If there weren't, perhaps that's a bigger scandal.

[D-IFF_ident]

Doesn't look as good with the RR engines...

I don't get the 'hostile environment' argument though - aren't those LAIRCM turrets in the picture?